Dividend announcements fail to entice investors
Despite the attractive dividend announcements, lack of bonus shares dampened investor confidence and share prices failed to increase.
This year, the dividend offering has risen in comparison to last year —especially by finance companies and development banks. However, since the past one and a half months, the stock index of the three subgroups —commercial banks, development banks and finance companies — has remained static.
Commercial banks had registered profit growth of more than 40 per cent. So far, eight class ‘A’ banks have declared dividends ranging from 14.73 per cent of Bank of Kathmandu to 65 per cent of Nabil Bank. However, since the dividend declaration began, the index of commercial banks has slumped by one per cent.
Likewise, development banks have also offered dividends of up to 55 per cent and finance companies’ dividend offering also is as high as 35 per cent. However, the index of both the sectors has slumped in the past one and a half months.
“Share investors were eyeing bonus shares from financial institutions that have yet to reach regulatory paid up capital requirement, but were disappointed,” said president of Nepal Investors’ Forum Raj Kumar Timilsina.
“The reason for the decline in share prices of Everest Bank and Standard Chartered Bank is scanty or absence of bonus announcement. Investors were expecting these two banks to offer a good amount of bonus shares this fiscal year to meet the regulatory capital requirement of Rs two billion by the end of the current fiscal year, but only Everest Bank offered 10 per cent stock dividend,” he said.
Investors prefer bonus shares of large commercial banks rather than cash as such stocks appreciate more in the long term.
Among the 228 listed companies, so far 40 companies have announced their dividends. Among these, 18 have already reached book closure date —investors who buy shares traded beyond book closure date are not entitled to dividends.
“Share prices started to go down once Nepal Rastra Bank allowed banks to present their capital increment plan by the end of the current fiscal year that removed the necessity to distribute bonus shares this time,” said Timilsina. Share prices of Everest Bank, Standard Chartered Bank Nepal, Nepal SBI Bank and Bank of Kathmandu had slumped even before the book closure date.
Among banks, Nabil Bank has announced highest dividend of 65 per cent — that is, for one unit share, the shareholder will get Rs 65 as dividend including both cash and stock dividend. It has announced it will give each shareholder Rs 40 cash and for every four shares investor holds, it will give one unit share as bonus.
Among development banks listed at Nepse, Nerude Laghubitta Bikas Bank — a class D microfinance bank — has offered the highest dividend of 55 per cent stock dividend. Likewise, among finance companies, recently listed Namaste Bittiya Sansthan has offered 35 per cent dividend.
This year also, Unilever has announced the highest dividend of Rs 760 per unit which is higher than that of last year. Unlike last year, Nepse has seen better days this year.
Post mid-April, index has travelled up more than 40 per cent — appreciating share prices further. The increased return on share trading has made investors relatively indifferent about dividends.
Chilime Hydropower has announced 40 per cent dividend which stood at 50 per cent last year. Likewise, dividend announced by Arun Valley Hydropower has also remained static at around 15.75 per cent.